Global Equities Advanced In 2019 – Stock Market Overview 

In sharp contrast to 2018, equity markets advanced in 2019 with gains not seen since 2013. Technology, financials, and communications were the leading S&P 500 sectors in 2019. Total stock market value increased $7.5 trillion for the year.

The equity market rebound from its topple in December 2018 was unexpected by many analysts, as 2019 began with expectations of a recession and further market downturn. International markets advanced broadly in 2019, with gains in both developed and emerging markets. Global bond markets have been favorable for stocks as historically low rates during the past decade incentivized governments and companies worldwide to borrow, boosting growth in expansion and capital investments globally.

The price/earnings ratio for the S&P 500 Index ended 2019 at 18.3, up from 15.6 at the end of 2018. Analysts view this ratio as an indicator for future expectations regarding the equity market.  (Sources: Bloomberg, S&P)

Rates Expected To Stay Steady – Global Fixed Income Overview

Fixed income markets are expecting that the Federal Reserve will maintain interest rates steady through 2020. Performance was positive across all bond sectors in 2019, with yields stabilizing toward the end of the year. Ending the year at 1.92%, the yield on the 10-year Treasury bond is still the highest yield available among the developed government bond markets. Government bond yields in developed economies including Germany and Japan were still negative at the end of the year.

To shore up liquidity at the end of 2019 and avert a market disruption like the one that occurred in December 2018, the Fed injected billions of dollars into the repurchase-agreement market, also known as the repo market, and has also bought roughly $400 billion of bonds since October 2019. The strategy has been very similar to the Fed’s quantitative easing program enacted during the financial crisis, also known as Q.E. (Sources: Federal Reserve, U.S. Treasury)

Low Mortgage Rates and Higher Home Prices – Housing Market 

A decade ago when the financial crisis was still a recent threat, the Federal Reserve embarked on a massive stimulus campaign to fortify and expand the housing market for millions of Americans. The objective was to facilitate low mortgage rates that would make home-buying an affordable investment. Although mortgage rates dropped to unprecedented low levels of below 4%, housing became unaffordable for many as housing prices accelerated.

Higher wages tend to drive higher housing prices, as increased wages enable workers to pay more for monthly mortgage payments. However, the rise in home prices over the past decade was largely attributable to the ultra-low mortgage rates. The past decade saw the average home price, as measured by Freddie Mac, rise 50% from 2010 to 2019, while wages, as measured by the Bureau of Labor Statistics, rose 29% over the same period. (Sources: Freddie Mac, Bureau of Labor Statistics, Federal Reserve)

Growth of Internet Use Varied Among Global Regions – Global Commerce 

The 2010s witnessed a dramatic increase in internet users worldwide. Over 4.3 billion people used the internet globally in 2019, which accounted for nearly 56% of the earth’s total population. Limitations to internet expansion have primarily been related to infrastructure. Remote regions with little or no electricity and connectivity have had the greatest challenges. Interestingly, emerging countries have seen more internet growth than many developed nations.

Emerging global regions including Asia and the Middle East saw internet users more than double over the decade, as developed regions including North America and Europe saw less growth. Demographic differences play a role: younger populations, characteristic of emerging countries, are more prominent internet users. Additionally, emerging regions generally started the decade with limited internet accessibility, and the relative outsize growth rates in internet use are largely indicative of these regions playing catch-up. (Sources: World Bank, FRED)